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Naira shortage triggers digital banking usage

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By Timothy Akintola

Banking crisis to be traced to the massive exit of IT support staff.

The recent redesign policy by the Central Bank of Nigeria has inflicted immeasurable hardship on many Nigerians. On the severe impact of this policy, monetary and economic experts have noted that the situation could cause major negative unintended consequences that might affect the deposit money bank. According to these experts, the current cash squeeze crisis could cause an overt shift to digital banking. In fact, a shadow of doubt has ravaged a host of traditional bankers as a result of the growing acceptance of digital banking. A banker whilst been interviewed, even told reporters that their fears were in fact more palpable now due to the turn of event over the last weeks.

With grounded digital payment systems, disabled Automated Teller Machines and a non-efficient over the counter operations, many banks reportedly shut out their customers over the last week. Digital services have become increasingly inefficient in serving the demands of most customers whose transactions take longer than expected to deliver or even fail. While many banks have drafted more personnel to handle the issues and complaints of angry customers, top banks have also lost good personnel to foreign companies. Numerous experts argue that this banking crisis is to be traced to the massive exit of numerous Information Technology support staff out of the country. Although there are no official statistics, reports still indicate that the adoption rate of banks that exist via mobile applications has increased to a feverish height.

Desire for flexible banking platforms triggered by Covid-19.

From the onset, these platforms have recorded at least 10 million downloads. However, the download numbers only indicate the interest received from the market rather than the actual subscribers. While some of these digital banking platforms are operated by licensed Microfinance banks, others have working partnerships with traditional banks such as Wema Bank’s ALAT. In fact, moves by traditional banks to acquire some of these digital banks had been earlier reported. The desire for a more flexible banking platform was immensely triggered by the Covid-19 pandemic. Sources even confirmed that bank managers were now more eager to move on with newer workers, whilst investing heavily in digital platforms.

However, market forces and other money users have commenced replacing traditional banks with digital ones for customers that are willing to enact cashless transactions. This development was after the CBN Governor, Godwin Emefiele, noted the possibility of making electronic payment more attractive by suspending the e-transfer charges. However, experts noted that Emefiele might be opening old wounds with this suggestion, with banks and Telcos holding depositors hostage over the settlement of Unstructured Supplementary Service Data (USSD) costs. While customers are to be charged N6.98 per transaction, many banks have charged far from the requirement, serving the poor and rural dwellers without access to the internet.

Banks breaching CBN’s guidelines must be sanctioned.

With the cost of banking getting immensely complicated due to the scarcity of cash, different crisis’ have been erupted within different ATM points across the country. As freshly, POS operators have leveraged on this situation to fleece bank customers. In many parts of the country, depositors pay as much as 20 to 40 percent of their transaction value in order to access their savings. In some banks in Lagos, ATMs have been restricted to paying just N10,000, while POS operators settle for 10 percent of the transaction, despite the CBN’s directive that the maximum withdrawal limit of customers should be set at N20,000. Emefiele, at a press conference in Lagos on Friday, stated that with the increased supply of new notes, the withdrawal limit would be increased.

Hoarding of cash has been recently sparked, with those with access to these new notes not making it available. This, experts have predicted would worsen the country’s situation overtime. Amidst the current critical situation, most experts have noted that the CBN was hasty in the implementation of this policy, regardless of the inherent benefits. Professor Uche Uwaleke, a professor of Capital Market at the Nasarawa State University indicated that banks breaching the CBN guidelines must be sanctioned. He further suggested that apex banks must consider increasing their limits from N10,000 to N50,000, as well as expanding their distribution channels. Godwin Ighedosa, the Director of the Institute of Fiscal Studies also explained that although the redesign policy was a guide used by nations to protect their local currencies, Nigeria’s approach was quite different from that of developed nations.

Actions of CBN, more politically motivated than of monetary policy.

However, with the February 10 deadline for the restriction of old notes, many Nigerians have urged the CBN to consider allowing the old notes to circulate side by side with the new notes. The Managing Director of a Microfinance Bank who preferred to be anonymous pointed that the CBN’s decision to regulate the release of the new notes was ill-advised. He noted that his bank had not received any redesigned notes from the CBN. He noted that the CBN could have feasibly pushed the new notes out quietly or better still, pushed out more lower denominations. Professor Mohammad Akaro Mainoma, a professor of Accounting and Finance and the former president of the Association of National Accountants of Nigeria (ANAN) noted that the actions of the CBN was more politically motivated than a monetary policy.

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